By TIOL News Service

NEW DELHI, AUG 10, 2016: THE applicant, a public limited company is before the Authority for Advance Rulings.

It is engaged in the manufacture and sale of PET Chips. The applicant now intends to start a new business whereby the applicant intends to import coal from outside India of various sizes and all that it intends to do is to crush the same and thereafter supply it to the customers as per their demand. In this, the applicant seeks to recover the crushing charges from those parties who require the crushed coal.

The only question which is asked is as to whether the process of crushing of coal would amount to manufacturing activity as understood in the context of Central Excise Act, 1944.

The Authority reproduced the definition of 'manufacture' as contained in section 2(f) of the CEA, 1944 and observed -

++ Considering the language of the Section, the activity of crushing the coal would not be covered in the definition of 'manufacture'. All that the applicant would be doing would be crushing the coal of different size. However, it is well understood that even after crushing the coal, the coal will not lose its character nor it will be a new product. Therefore, in our opinion, the activity could not be covered as a 'manufacturing activity' nor the crushed coal could be manufactured product.

++ The Revenue also does not seriously claim that this would be covered under the Central Excise Act, 1944. The Excise Commissioner, however, says that it may amount to 'service'. But that is a different issue which does not fall for consideration here.

Holding that coal crushing activity would not amount to 'manufacturing activity' and the coal so crushed will not be a manufactured product within the meaning of the definition provided in s.2(f) of CEA, 1944, the question was answered in favour of the applicant.

(See 2016-TIOL-16-ARA-CX)